Legislative Session: 81(R)

House Bill 469

House Author:  King, Phil et al.

Effective:  9-1-09

Senate Sponsor:  Seliger

            House Bill 469 amends provisions of the Government Code, Health and Safety Code, Natural Resources Code, and Tax Code relating to tax incentives for certain clean energy projects.

            House Bill 469 requires the comptroller of public accounts to adopt rules to issue a franchise tax credit to an entity implementing a clean energy project connected with the construction of a new facility.  "Clean energy project" is defined as the construction of a coal-fueled or petroleum coke-fueled electric generating facility, including a facility in which the fuel is gasified before combustion, that: has a capacity of at least 200 megawatts; meets emission limits outlined in the bill; will capture at least 70 percent of the carbon dioxide resulting from the generation of electricity by the facility; is capable of permanently sequestering the captured carbon dioxide in a geological formation; and is capable of supplying the carbon dioxide for use in an enhanced oil recovery project. An entity is eligible for a tax credit as determined by the comptroller provided that: a certificate of compliance for the project is issued by the Railroad Commission of Texas, which is limited to issuing not more than three certificates; the facility is completed and fully operational; the Bureau of Economic Geology of The University of Texas at Austin has verified the facility is sequestering at least 70 percent of the carbon dioxide resulting from the generation of electricity by the facility; and the project's owner or operator has signed an interconnection agreement with the Electric Reliability Council of Texas. The bill sets the amount of the franchise tax credit as equal to the lesser of 10 percent of the total capital cost of the project or $100 million, but limits the amount of the credit to the total amount of franchise tax that would have been due if the entity operating the clean energy project had not received the credit.  The franchise tax credit will not be issued until September 1, 2013.

            House Bill 469 provides for a sales and use tax exemption for qualified components of tangible personal property used in connection with an advanced clean energy project under the Health and Safety Code or a clean energy project under the Natural Resources Code. To qualify for exemption, the components must be installed to capture carbon dioxide from an anthropogenic emission source, transport or inject carbon dioxide from such a source, or prepare carbon dioxide from such a source for transportation or injection. In addition, the carbon dioxide must be sequestered in Texas either as part of an enhanced oil recovery project that qualifies for a severance tax rate reduction or in a manner that creates a reasonable expectation that at least 99 percent of the carbon dioxide will remain sequestered from the atmosphere for at least 1,000 years. The Texas Commission on Environmental Quality is responsible for approving the application of a project to be certified as an advanced clean energy project.

            House Bill 469 extends from seven years to 30 years the 50 percent reduction in the severance tax rate available to producers of oil recovered through enhanced oil recovery projects that use carbon dioxide generated by a clean energy project. In addition, the bill extends the qualifying time period carbon sequestration projects and other advanced clean energy projects have to make a qualified investment in a reinvestment zone to receive a limitation on the project's appraised value under the Texas Economic Development Act. Current law provides that the qualifying time period for most projects is the first two tax years after approval.  The bill extends that time period for advanced clean energy projects to the first five tax years.